Even as the market continues to focus on bearish short-term indicators, like high North American inventories and expectations of more supplies from Iran in the next few months, separate reports this week by Wood Mackenzie, the energy research consultancy, and Barclays Capital Inc., the investment bank, suggest the collapse in investment has been so severe that a “wall of output” won’t be flowing as expected by the end of the decade.

Capital spending worth US$380 billion, on 68 major projects, has been deferred since oil prices started crashing in late 2014, and an additional US$170 billion is at risk from 2016 to 2020, particularly in deep water projects, Wood Mackenzie said Thursday.

“With oil prices recently falling to their lowest level since 2004, oil and gas companies will be forced to go into survival mode in 2016,” said Tom Ellacott, vice-president of corporate analysis at Wood Mackenzie. “Further project delays and cuts to discretionary investment are highly likely.”

The cancellations so far correspond to 2.9 million barrels a day of oil production deferred until early in the next decade. To put it in context, today’s world oil production is about 92 million barrels a day, and the estimated supply surplus that pushed down prices by two-thirds is 1.5 million barrels a day.

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Deepwater projects around the world were hardest hit by the oil crash because costs have remained resilient, but Canada is among the countries with the longest list of delayed large projects, concentrated in the oilsands, Wood Mackenzie said.

“The impact of lower oil prices on company plans has been brutal,” said Angus Rodger, Wood Mackenzie principal analyst. “What began in late-2014 as a haircut to discretionary spend on exploration and pre-development projects has become a full surgical operation to cut out all non-essential operational and capital expenditure.”

Companies have been forced to delay investment to re-consider the most cost-effective path to commerciality and free up the capital just to survive, Rodger said.

Meanwhile, a survey of 225 oil and gas producers by Barclay’s predicts global spending will decline a further 15 per cent in 2016 (and could dip by 20 per cent if prices stay below US$40 a barrel), on top of last year’s 23 per cent decline.

“This is only the eighth decline in global spending in the 31-year history of this survey and the first ‘double-dip’ decline since 1986/1987,” Barclays said in its global spending outlook for 2016, released Wednesday.

‘What began in late-2014 as a haircut to discretionary spend on exploration and pre-development projects has become a full surgical operation’

In North America, budgets could be cut even deeper, or 27 per cent in 2016, with downside risk of as much as a 50 per cent if prices stay around US$35 a barrel, following a 27 per cent decline in spending in 2015.

Only 13 per cent of oil production is hedged in larger companies in 2016 — down from 16 per cent in 2013 — making them more exposed to oil prices and increasing risk they will cut back investment.

In contrast, budgets in the Middle East are expected to rise by 5.5 per cent, after a six per cent contraction in 2015, Barclay’s survey found, largely on the back of higher activity in Saudi Arabia, the instigator the price war that pushed oil prices below US$30 a barrel this week and that caused the investment drought.